One year ago lerner and luckmann co. issued 15-year, noncallable, 7.5% annual coupon bonds at their par value of $1,000. today, the market interest rate on these bonds is 5.5%. what is the current price of the bonds, given that they now have 14 years to maturity?

current price = $1191.79

Explanation:

given data

time t = 15 year

annual coupon bonds rate =  = 7.5 %

par value = $1000

interest rate = 5.5%

maturity time  = 14 year

to find out

current price of the bonds

solution

we get here first annual coupon rate = 7.5% of 1000

annual coupon rate  C = $75

so now we get current price of bond

current price of the bonds =      .................1

put here value

current price =  

current price =

solve it we get

current price = $1191.79

answer; dividing net income by 1- t ;